Bulk drug makers fret over refund delays, cost escalation under GST regime

Bulk drug makers are worried over the adverse impact the Goods and Services Tax (GST) as pharma products are grouped in the 18-per cent tax bracket. “This will mean that we have to drain 18 per cent of our export revenue up front to the government and wait for refund,” M Jayant Tagore, President, Bulk Drug Manufacturers Association-India (BDMA-I), told BusinessLine.

At present, pharma/bulk drug exporters pay some 20 taxes/duties. All these will be merged into GST.

“Claiming 18 per cent tax refund from the Government is a cause for worry as it could get delayed and escalate costs, among other hassles,” Tagore said adding that the experience of claiming refunds from Government has not been pleasant or transparent.As pharma exports are at about ₹1 lakh crore, GST implementation will drain ₹18,000 crore from the industry, which will be reimbursed by the Government later.

The BDMA has already requested the government to ensure speedy disbursal of refund in case of pharma exports. “It should be made digital, and human interface needs removed totally for speed and transparency,” the association functionary said.

As far as the quantum of tax is concerned, GST impact will be neutral as the existing taxes for pharma industry are in the 18 per cent range. Ensuring smooth roll-out of the new tax regime becomes vital in the context of a marginal decline in exports at an estimated $16.4 billion during the financial year ended March 31, 2017 against $16.89 billion during 2015-16.

The BDMA will rope in institutions of global repute such as IICT to conduct larger studies to prove that pharmaceutical manufacturing clusters (PMCs) in and around Hyderabad, in particular, and India, in general, are not responsible for making culturable bacteria drug-resistant. A recent study conducted by the Department of Animal Biology, School of Life Sciences, University of Hyderabad for BDMA, showed that PMCs in and around Hyderabad are not responsible for making culturable bacteria drug-resistant.

“There are international lobbies working to harm the reputation and growth prospects of the India pharma industry and this has to be dealt with seriously,” he added.